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Article
Publication date: 15 December 2020

Kofi Mintah Oware and Thathaiah Mallikarjunappa

The purpose of this study is to examine the moderating effect of mandatory corporate social responsibility (CSR) reporting on CSR expenditure and financial performance of…

Abstract

Purpose

The purpose of this study is to examine the moderating effect of mandatory corporate social responsibility (CSR) reporting on CSR expenditure and financial performance of listed firms in India. It uses institutional theory to explain the relationship.

Design/methodology/approach

The study used the Indian stock market as the testing grounds and applied descriptive statistics, hierarchical regression and panel regression with fixed effect assumptions for 800 firm-year observations for the period 2010 to 2019.

Findings

The study shows a positive and statistically significant association between CSR expenditure and financial performance [return on assets (ROA) and Tobin’s q]. Also, the study shows a positive association between financial performance (ROA and Tobin’s q) and CSR expenditure. Furthermore, the study shows that mandatory CSR reporting leads to an increase in CSR expenditure. Finally, the study shows that mandatory CSR reporting moderates the association between CSR expenditure and financial performance stock price returns). The study control for any form of heteroscedasticity, serial correlation and endogeneity effects.

Research limitations/implications

The study used one country data to represent the emerging economies. The use of one country data can limit the generalisation of the study.

Originality/value

Different studies have examined mandatory CSR reporting association with CSR disclosure or financial performance. However, this study takes the discussion further and contribute a novelty to sustainability development studies with the examined moderating effect of mandatory CSR reporting in the association between CSR expenditure and financial performance.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 17 March 2020

Arunesh Garg and Pradeep Kumar Gupta

This study, based on the instrumental approach of the stakeholder theory, examines the firm performance of public and private sector firms in the mandatory corporate…

Abstract

Purpose

This study, based on the instrumental approach of the stakeholder theory, examines the firm performance of public and private sector firms in the mandatory corporate social responsibility (CSR) expenditure regime in India. CSR was legislated in India in the year 2014.

Design/methodology/approach

The study hypothesizes that firms which fulfill the mandatory CSR expenditure requirement will have a higher firm performance and uses one-way ANOVA and post-hoc test for analysis. Firm performance is examined with respect to firm value and market performance.

Findings

The instrumental approach of the stakeholder theory is not supported in the mandatory CSR expenditure regime in India. The public sector firms that comply with the mandatory CSR expenditure requirement have a lower firm performance. Further, the private sector firms that meet the mandatory CSR expenditure criterion do not have a significantly different firm performance than the private sector firms that do not fulfill this criterion.

Practical implications

The study indicates as to why some firms fail to meet the CSR expenditure compliance. It also gives suggestions on how regulators and government agencies can solicit the participation of the Indian firms to undertake CSR initiatives. The study further suggests how firms may reap maximum benefit from the CSR expenditure.

Originality/value

Since CSR expenditure has been made mandatory only in the year 2014 in India, hardly any study has examined firm performance in the mandatory CSR expenditure regime in India.

Details

South Asian Journal of Business Studies, vol. 9 no. 2
Type: Research Article
ISSN: 2398-628X

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Book part
Publication date: 21 October 2020

Annkatrin Mies and Peter Neergaard

In 2014, the European Union (EU) adopted the non-financial reporting Directive (2014/95/EU) making the disclosure of certain non-financial topics mandatory for large…

Abstract

In 2014, the European Union (EU) adopted the non-financial reporting Directive (2014/95/EU) making the disclosure of certain non-financial topics mandatory for large listed companies. They are required to report on policies, actions and outcomes regarding their environmental impact, social and employee matters, impact on human rights and corruption. Denmark introduced mandatory corporate social responsibility (CSR) reporting already in 2009, while Germany had no specific legislation on CSR reporting before 2017. Some authors allege that regulation positively impacts CSR reporting, while others argue that the voluntary nature of CSR reporting is essential (Romolini, Fissi, & Gori, 2014). Critics of mandatory reporting claim that non-financial reporting should develop bottom-up, as mandatory one-size-fits-all solutions are inappropriate given the differences among companies (ICC, 2015). The aim of this chapter is to evaluate the effect of legislation on reporting quality by comparing Denmark with a long tradition for mandatory reporting and Germany introducing mandatory rather recently. However, a rich body of literature exists on factors impacting CSR reporting other than legislation. These are among others: firm size, ownership structure, industrial sector and culture (Hahn & Kühnen, 2013.)

The chapter applies a content analysis of 150 CSR reports from German and Danish listed companies between 2008 and 2017 from four different industrial sectors. The chapter finds that mandatory reporting improves overall report quality by lifting the quality floor, yet, without lifting the quality ceiling. Size is important as improvements in reporting are largest in small and medium-sized companies. Companies in environmentally sensitive sectors tend to disclose more relevant environmental information than companies in less sensitive sectors. Both culture and ownership structure has a moderating effect on report quality.

Details

Governance and Sustainability
Type: Book
ISBN: 978-1-80043-151-5

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Article
Publication date: 24 July 2020

Juniarti

Mandatory corporate social responsibility (CSR) aims to protect the long-term benefit of shareholders; therefore, this study aims to seek empirical evidence for the…

Abstract

Purpose

Mandatory corporate social responsibility (CSR) aims to protect the long-term benefit of shareholders; therefore, this study aims to seek empirical evidence for the benefit of mandatory CSR from the perspective of shareholders.

Design/methodology/approach

Consistent with the objective of this study, the long-term shareholder benefit is measured using the sustainability perspective. Companies listed on the Indonesia Stock Exchange that have at least five years of CSR implementation, as its mandate and have retroactive earnings data for minimum six years before the observation year are selected as the study’s sample.

Findings

The findings support that mandated CSR protects long-term shareholder value; there is a significant association between CSR and sustainable shareholder value. Industry profiles are an essential aspect of the association model. The results are robust through testing the association for various scenarios of time.

Research limitations/implications

This study uses a single measurement of shareholder value based only on accounting measurement. Further, due to limitations in accessing internal company data, this study relies on annual reporting information to measure CSR implementation.

Originality/value

This study is the first to provide empirical evidence of the long-term benefit of mandatory CSR from the shareholders' perspective. This study also contributes to the existing literature by evaluating the success of mandatory CSR in developing countries. Those that successfully implemented mandatory CSR can serve as a model for other developing countries interested in creating similar policies to encourage socially responsible companies.

Details

Social Responsibility Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 20 April 2020

Asit Bhattacharyya and Md Lutfur Rahman

India has mandated corporate social responsibility (CSR) expenditure under Section 135 of the Indian Companies Act, 2013 – the first national jurisdiction to do so. The…

Abstract

Purpose

India has mandated corporate social responsibility (CSR) expenditure under Section 135 of the Indian Companies Act, 2013 – the first national jurisdiction to do so. The purpose of this paper is to examine the impact of mandated CSR expenditure on firms’ stock returns by using actual CSR spending data, whereas the previous studies mostly focus on voluntary CSR proxied by CSR scores.

Design/methodology/approach

The authors estimate their baseline regression by using ordinary least squares(OLS) method. Although the baseline regression involving CSR expenditure and stock returns using ordinary least squares method are estimated, endogeneity and reverse causality biases are addressed by using two-stage least squares and generalized method of moments approaches. These approaches contribute mitigating endogeneity bias and biases associated with unobserved heterogeneity and simultaneity.

Findings

The findings document that mandatory CSR expenditure has a negative impact on firms’ stock returns which supports the “shareholders” expense’ view. This result remain robust after controlling for endogeneity bias and the use of both standard and robust test statistics. The authors however observe that this result holds for the firms with actual CSR expenditure equal to the mandated amount but does not hold for the firms with actual CSR expenditure greater than the mandated amount. Therefore, the authors provide evidence that CSR expenditure’s impact on stock returns depends on whether firms simply comply the regulation or voluntarily chose an amount of CSR expenditure above the mandated amount.

Originality/value

The primary contribution is to present a valid and robust evidence of negative effect of mandated CSR spending on firms’ stock returns when the mandatory CSR spending rule is already in place. This study contributes by examining the impact of mandated CSR spending on stock during post-implementation period (2015-2017), whereas other studies by Dharampala and Khanna (2018); Kapoor and Dhamija (2017); and Mukherjee et al. (2018) mainly examined the impact of legislation on Indian CSR. The authors use mandated actual CSR expenditure, whereas previous studies mostly focus on voluntary CSR proxied by CSR scores.

Details

Meditari Accountancy Research, vol. 28 no. 6
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 1 January 2005

Wim Vandekerckhove and R M.S.

Despite numerous calls from civil society for mandatory regulation on Corporate Social Responsibility (CSR), the European Commission in its Green and White Paper…

Abstract

Despite numerous calls from civil society for mandatory regulation on Corporate Social Responsibility (CSR), the European Commission in its Green and White Paper, emphasised the voluntary character of CSR. This paper tries to go beyond the voluntary / mandatory juxtaposition by reframing CSR as Network Governance. In the paper, we argue that a network perspective is an adequate way to look at corporations, that the European Commission's communications are compatible with that perspective, but that the Commission's role in a European framework on CSR goes further than promoting voluntary actions. Rather, to develop a European mandatory framework on CSR as Network Governance would insure that fair interactions between stakeholders are started up and intensified. However, CSR as Network Governance does leave substantial flexibility for tailoring local integration of business.

Details

Social Responsibility Journal, vol. 1 no. 1/2
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 5 October 2015

A.H. Fatima, Norhayati Abdullah and Maliah Sulaiman

The purpose of this study is to investigate the environmental disclosure (ED) quality of public-listed companies (PLCs) in environmentally sensitive industries (ESI) in…

Abstract

Purpose

The purpose of this study is to investigate the environmental disclosure (ED) quality of public-listed companies (PLCs) in environmentally sensitive industries (ESI) in Malaysia in 2005 and 2009 (two years before and two years after the mandatory corporate social responsibility (CSR) requirement of Bursa Malaysia (BM)). BM (The Stock Exchange of Malaysia) has made CSR, including ED in annual reports mandatory since 2007. This study compares environmental reporting (ER) before and after the 2007 mandatory reporting requirement to determine if this command and control mechanism has had any effect on the quality of ED.

Design/methodology/approach

The quality of ED was measured using a disclosure quality index adapted from various prior studies. The index consists of a total of 46 disclosure items grouped into 9 categories. Content analysis was utilized to extract data from the annual reports of 164 PLCs in ESI.

Findings

Overall, the quality of ED improved in 2009 from that of 2005. More importantly, companies disclosed more quantitative environmental information in 2009 than in 2005. However, the average quality of ED was still low in 2009 compared to the overall potential score. Results provide some support for legitimacy as well as institutional theories.

Research limitations/implications

The sample of the study consisted of listed companies in ESI only; the results cannot be generalized to other companies in non-environmentally sensitive sectors.

Practical implications

Prior studies that used data before the mandatory CSR requirement by BM found ED in annual reports mainly declarative in nature, generally low on quality and with little quantifiable data. The results of the present study provide evidence of the positive impact of mandatory environmental reporting on ED quality.

Originality/value

The use of a multi-theoretical perspective may offer a more meaningful explanation of ER behavior in Malaysia. The results of the study would provide the impetus for regulatory agencies in developing countries to perhaps consider legislating ER. The findings provide some evidence to support the influence of legitimacy and institutional factors behind improved ED of Malaysian PLCs. This outcome exhibits a positive influence on the government efforts in promoting sustainability. Finally, the study contributes to present a more up-to-date account of environmental commitment undertaken by Malaysian corporations through their environmental reporting, after the CSR mandatory listing requirement took effect in 2007.

Details

Social Responsibility Journal, vol. 11 no. 4
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 5 May 2021

Rattan Sharma and Priti Aggarwal

The purpose of this paper is to investigate the impact of mandatory corporate social responsibility (CSR) expenditure on the firm’s financial performance in the aftermath…

Abstract

Purpose

The purpose of this paper is to investigate the impact of mandatory corporate social responsibility (CSR) expenditure on the firm’s financial performance in the aftermath of insertion of Section 135 in the Companies Act, 2013 for Indian listed companies.

Design/methodology/approach

The paper uses independent sample t-test, one-way ANOVA, fixed effect panel regression model and principal component analysis on a data set of 153 non-financial companies listed in BSE-500 companies for a period of 2015–2019.

Findings

The empirical results of the paper suggest that the mandatory CSR expenditure negatively impacts the company’s profitability.

Practical implications

The study has important implications for regulators and listed companies. Firstly, the mandatory CSR expenditure acts as a burden onto the on-going activities of the firms. CSR activities, therefore, should be integrated with the existing skillsets and expertise of the firms. Secondly, the government can encourage CSR activities by making the expenditure tax deductible. Moreover, the Schedule VII list of activities has a scope to become more inclusive rather than the present exhaustive list.

Originality/value

The paper highlights the gap in the expectation and actualisation of the CSR mandate by studying the recent data of the sample companies of the BSE-500 index. The paper adds to the CSR literature in the emerging market context.

Details

Social Responsibility Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 3 October 2016

Md Moazzem Hossain and Manzurul Alam

The purpose of this paper is to investigate organisational accountability to less economically powerful stakeholders in the absence of formal corporate social reporting …

Abstract

Purpose

The purpose of this paper is to investigate organisational accountability to less economically powerful stakeholders in the absence of formal corporate social reporting (CSR) guidelines. In addition, this study emphasises the role of administrative and institutional reforms in empowering stakeholders in a developing country context, namely, Bangladesh.

Design/methodology/approach

Consistent with prior literature, this qualitative study collected data through semi-structured interviews with 23 representatives from NGOs, media, civil society, customers, regulators, trade union leaders and employees who are considered as less economically powerful stakeholders. This paper draws on the demand for administrative reforms along with an institutional support structure (Owen et al., 1997) to enhance CSR and corporate accountability.

Findings

The empirical evidence shows that there is a need for a stand-alone mandatory CSR to achieve stakeholder accountability. It also shows that there are demands from “stakeholders to right to know” about the company’s social and environmental performance along with stakeholder engagements. There is a perceived demand for administrative reform along with institutional supports that can contribute to the CSR development in Bangladesh. These administrative reforms would encourage transparent corporate social and environmental practices. Given the socio-economic and vulnerable environmental conditions of Bangladesh, stakeholders in this study suggested contextually relevant CSR guidelines towards greater accountability.

Research limitations/implications

This paper is one of the few engagement-based studies which explore the perceptions of less economically powerful stakeholders towards CSR developments in an emerging economy – Bangladesh. The findings of this study using the theoretical lens of accountability with administrative and institutional reforms lead us to conclude that companies in Bangladesh have low level of CSR towards stakeholder accountability and stakeholder engagements.

Originality/value

The paper contributes to the CSR literature by highlighting the needs of CSR from the stakeholder’s accountability perspective.

Details

International Journal of Accounting & Information Management, vol. 24 no. 4
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 27 November 2020

Sudipta Sen Gupta and Deepti Wadera

This paper aims to ascertain Indian consumers’ corporate social responsibility (CSR) perceptions; an affinity for stipulated causes and perceived fit between cause and…

Abstract

Purpose

This paper aims to ascertain Indian consumers’ corporate social responsibility (CSR) perceptions; an affinity for stipulated causes and perceived fit between cause and industry in the current mandatory CSR era in India.

Design/methodology/approach

Primary data was collected through an online survey from 1,251 consumers via quota sampling and snowballing, across 36 Indian cities.

Findings

The findings indicate no skepticism, positive CSR support and company evaluation. Indian consumers have the greatest affinity for environmental protection. Segments of socially, environmentally and culturally conscious consumers were found. Under quasi-experimental conditions of CSR fit and cause-affinity, positive purchase intention is exhibited across fast-moving-consumer-goods sectors; in which case CSR perceptions cease to have a significant impact on purchase intention.

Research limitations/implications

This result contributes to understanding Indian consumers’ perspective in the mandatory CSR era and adds to the literature on strategic CSR and communication by segmenting consumers by cause affinity.

Practical implications

CSR practitioners could align with consumer-relevant causes that fit with their company’s core business, as controllable initiatives, instead of depending on positive, but less controllable, CSR perceptions of consumers. Implications of the findings on CSR policymaking by the government are also discussed.

Social implications

The mandatory CSR law has been viewed as a burden by corporate India. This research implies that it may be possible to look at it as an opportunity for strategic CSR, to create a win-win situation for both business and society.

Originality/value

One of the first studies on cause-affinity and CSR fit among Indian consumers using the government stipulated list of causes.

Details

Society and Business Review, vol. 16 no. 1
Type: Research Article
ISSN: 1746-5680

Keywords

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